Jacoby & Meyers Wins Round in Dispute on Nonlawyer Investors (3)

Jan. 9 (Bloomberg) -- Jacoby & Meyers LLP, the discount law firm with storefront offices across the U.S., won an appeals court ruling reinstating its legal attack on a New York statute barring nonlawyers from owning an interest in law firms.

Jacoby & Meyers, which wants capital to expand into communities with working-class and immigrant families, has asked federal courts in New Jersey and Connecticut as well as New York to throw out such laws. A judge last year dismissed the New York case citing jurisdictional grounds.

The U.S. Court of Appeals in New York today issued an order modifying a November ruling that reinstated the suit and returned it to the trial court.

“The Second Circuit clearly said they want the judge to make a determination on the merits,” Andrew Finkelstein, the managing partner at Jacoby & Meyers, said in a phone interview.

The firm, which has offices in the three states, wants to add new legal challenges in its suit, which the appeals court said it may do. The court didn’t rule on the “interesting theoretical issues” raised by the case.

Melissa Grace, a spokeswoman for New York Attorney General Eric Schneiderman, who is defending the lawsuit, declined to comment on the decision.

Other Challenges?

A ruling in Jacoby & Meyers’ favor might lead to legal challenges elsewhere and change the nature of the U.S. legal industry, Finkelstein said. Rules similar to New York’s exist in every U.S. state.

The District of Columbia permits nonlawyers to join law firms in limited instances. Australia and England allow nonlawyers to own parts of law firms.

“A final decision down the road would benefit all consumers in the U.S., giving them access to legal services that don’t now exist,” Finkelstein said.

Opponents of lifting the ban say they fear that investors wanting to maximize profit will interfere with lawyers who are bound by ethical rules that may conflict. The American Bar Association has decided not to consider a proposal that nonlawyers be allowed to work as law firm partners assisting lawyers.

Bank Directors

“There was no clamor for it evident within the profession,” Ted Schneyer, an emeritus law professor at the University of Arizona who serves as co-chairman of the ABA’s working group, said in a phone interview. “If this is to come about, it will have to come from litigation like Jacoby & Meyers is pursuing.”

Three directors of a small New York bank, including one who also sells new and used Mercedes-Benzes, have expressed interest in investing in Jacoby & Meyers, the firm said in court papers. Institutional investors whose names the firm has asked to keep confidential also seek stakes.

If Jacoby & Meyers ultimately prevails, the investors may receive a share of anticipated profits in the entity through which Jacoby & Meyers practices law, the firm said in court papers. They’ll have no say in legal decisions.

Jacoby & Meyers is seeking to sue on behalf of other law firms. It claims the bans run afoul of the Commerce Clause of the U.S. Constitution and the firm’s rights of free speech and due process.

The cases in New Jersey and Connecticut are pending.

Jacoby & Meyers opened its first office in 1972 in a storefront in Van Nuys, California, and was an early advocate of attorney advertising. It said it has opened branches in shopping centers, maintained Saturday hours and became the first law firm to let clients pay with credit cards.

The case is Jacoby & Meyers v. Presiding Judges, 12-1377, U.S. Court of Appeals for the Second Circuit (Manhattan).